by John Rubino
Bitcoin has had a helluva week. And many of its fans see its recent spike as just the beginning of a run that converts it from cult favorite to global reserve currency.
[…] That’s an exciting prospect for a lot of reasons. But it’s not yet a done deal. One of the many concerns that non-HODLers have about bitcoin is that its algorithmically-constrained supply might be a kind of mirage, because other cryptocurrencies with similar characteristics and utility can be created in infinite numbers.
From a trader’s perspective, here’s what that means: If bitcoin keeps rising relative to, say, ethereum and litecoin, it creates an arbitrage in which investors sell bitcoin and reinvest their profits in much-cheaper but otherwise similar – and therefore equally attractive as a store of value – coins. So bitcoin’s price falls (or at least rises more slowly) while ethereum and litecoin gain ground. The crypto universe diversifies and expands, partially at bitcoin’s expense. And bitcoin, while still successful, misses its chance to conquer the global monetary system.